Irish investors push to scrap 38% deemed disposal tax on ETF gains

Ireland’s deemed disposal tax requires a 38% levy on unrealised gains from exchange-traded funds after eight years, even if the investor does not sell the holding, disrupting the power of compounding and creating administrative hassles. While the rule was introduced during the Celtic Tiger to prevent long-term tax avoidance, it now stands out as an outlier, with most European nations taxing ETF profits only on disposal and at much lower rates.

Denmark taxes unrealised gains annually at 27-42%, Germany imposes a modest annual charge of around €30-€40 on a €1,000 gain, and the Netherlands recently reversed a planned 36% annual tax. The UK imposes no tax on unrealised ETF gains, especially within tax-advantaged ISAs. Finance Minister Simon Harris is reportedly considering removing the rule in the next Budget, a prospect that has been widely welcomed. A Department of Finance report already advised abolishing the tax and reducing the exit charge to 33%, but the government’s focus on other investment schemes may delay action.